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The Cold, Hard Truth About Health Insurance – Truth Both Trump and Ryan Ignore

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Where is the discussion of facts when it comes to health care?

Why do we keep talking about the cost of “health insurance” when that’s a symptom and not the problem?

Why do we keep talking about “subsidies” (tax credits, etc)?

If you’re coughing incessantly because you have lung cancer do you simply take a cough suppressant and call that a “fix” when you stop coughing for a while?

That entire line of discussion, which is the only discussion being held politically and in the news, is a fraud.


Two reasons: First, “health insurance” is not insurance to the extent it covers an event that is either certain to happen or has already happened. Insurance is a thing you buy to cover a possible future event you cannot pay for yourself.  It is less expensive than the event will be only because the probability is less than 1.0 — that is, the event is unlikely.  If the event is either certain or worse, has already happened then the probability is 1.0 and the cost of “insurance” against such an event is always more than simply paying for it in cash because the insurance company has costs it must cover or it will go out of business.

Let me repeat that just in case you missed it: The cost of insuring against a bad event is directly and mathematically determinable by the cost and probability of said event.

Second, due to the above mathematical fact if you wish to decrease the amount “insurance” costs there is only one way to do it: You must decrease the cost of the event, the probability of the event or both.

This is arithmetic, not politics and anyone arguing otherwise needs to be indicted, tried, convicted and imprisoned for their intentional act of fraud upon the public because that’s exactly what they’re doing — defrauding you.

I don’t care if they’re pundits, media personalities, Congresspeople or the President — and I remind you that The President is well aware of how insurance actually works since he’s been a Real Estate developer and operator for decades.

Now let’s address the only two means by which we can lower health insurance costs.  And lower them we can — by 90% or so, and quickly too — in fact, within months.

First, insurance must be actual insurance.  In other words it must only cover events for which p < 1.0.  By definition those are events that are neither certain to happen (e.g. routine, every-day visits to a doctor) or have already happened (e.g. pre-existing conditions.)

While you might be able to buy fire insurance on your house if it’s on fire (or you are in the process of setting it on fire!) the cost of that insurance will always be more than the fire damage to said house because the probability is 1.0 and the company has to cover its cost and make a profit or it goes out of business.  It is therefore always cheaper to simply pay cash for the fire damage than to buy said “insurance” and this is true irrespective of what you’re “insuring” — including health.

Again, this is math, not politics.

Second, we must address both “p” (probability) and “c” (COST.)

We must address “p” (probability) because it will directly and grossly reduce the cost of insurance since it is a multiplier to cost.  Reducing “p” by 10% directly reduces cost of insurance by 10% all other things being equal.

We must address “c” (cost) because that not only reduces the cost of insurance (but on a smaller basis than “p” since it’s multiplied by the fraction of risk) for the person who has already had the bad thing happen to them medically it enables them to pay directly for the treatment required. I remind you that paying directly is always going to be cheaper than running that same payment through an “insurance” company (typically by about 10-20%) because said company has costs that have to be covered.

Let’s take “p” on first.  An utterly enormous amount of health expense occurs because people choose to be overweight or obese.  As noted in a previous Ticker the American Diabetes Association claims $250 billion a year is spent by Medicare alone due to both the disease and its effects.  Best guess is that another $150 billion is spent by Medicaid (which they don’t specify.)  This is for one disease and essentially all of that money doesn’t have to be spent.  It is spent because people choose to consume foods that promote and exacerbate the condition rather than reduce or even eliminate its effects.  The cost of changing what you put in the pie hole, medically, is of course zero.  Therefore for each person who is diabetic (Type II) and makes said lifestyle change resulting in either the control or elimination of the harm to their body from same we eliminate all of the health spending by said person on said disorder!

There are myriad other diseases and disorders associated with being obese and overweight.  Hip and knee damage, eventually leading to (expensive) replacement surgeries, for one.  Heart attacks and strokes (many caused by high blood pressure that, again, is often a result of being overweight) for another.  These are all avoidable costs and if we wish to address the cost of health care reducing “p”, the probability of bad events, is a key item.

It is absolutely true that personal choice is a huge factor here and the government does not have the right to tell you how or what to eat.  However, you do not have the right to demand that someone other than yourself pay for the consequences of your personal decisions.

It is therefore perfectly reasonable to put in place a protocol that says if you are overweight or obese and diabetic then the lifestyle change in terms of what you put in the pie hole that has a near-100% record of reducing or eliminating your need for drugs and medical procedures and has a cost of zero will be the only option offered under said publicly-funded programs until and unless you prove, by individually-shown test, that it doesn’t work in the case of your particular metabolic makeup.

Doing this for one disease alone would cut roughly $400 billion off the federal budget this year and every year thereafter and would cost the patient exactly zero on top of it.

Can we extend this demand to private health care policies by force?  No, but we can certainly allow companies to multiply their pricing by the change in “p” that not following such a lifestyle, if you’re overweight or obese, comes with.  Since this one disease is such a huge component of said spending my best guess is that the surcharge for refusal would likely be 25% or more and if you’re already diabetic then it can (and should) be an immediate disqualifier for any coverage of any consequential event whatsoever unless you prove, by individual test, that the lifestyle change outlined above doesn’t result in control of your condition.

Second, we must break all the monopolies in the medical system.  There are in fact simple ways to do this, requiring no new laws, which I’ve outlined before going way back in time.

If you force price transparency by treating any health provider who refuses to do so, or who tries to bill on a discriminatory basis as committing a criminal act under existing consumer protection and anti-trust laws (at both the State and Federal levels) you will instantly and permanently remove all so-called “network” games, break the monopoly pricing games played by the health industry and as a result competition will cause prices to fall like a stone.

It’s worthless to even attempt to argue that this “can’t” or “won’t” work because we know it does.  The Surgery Center of Oklahoma does exactly this right here, right now, today and their pricing with the monopolist-laced chain of supplies for drugs and surgical devices still undercuts “traditional” hospital prices by 80%.  For example a cardiac bypass is $10,700 — cash, all-in, one-price and if there’s a complication taking care of that is included.

Can you come up with $10 large to save your life if you need it?  Almost-certainly, even if you’re poor.  Yes, it would be a lot of money for someone without material means, but remember — we’re talking about a price that’s anywhere from 1/10th to 1/5th of what that same procedure costs in a “traditional” hospital setting and you’re choosing between that and death.

Don’t tell me it can’t be done and wouldn’t result in these sorts of cost reductions because it is being done right now, right here, today and has resulted in these cost reductions — even with a huge part of the medical scamjob monopolist games still embedded in their pricing because they can’t get away from the drug monster in their ORs at present.  In other words their pricing is high (probably by 20% or so) compared to what it would be if we stopped all of the monopolist games.

Here’s the bottom line folks — if you think “health insurance” costs too much you’re being misled.  The problem isn’t health insurance it’s the cost of health care.  The solution to the problem is to first require firms to offer true insurance (that is, does not cover events where p = 1.0) then require all providers to post prices and charge everyone the same amount.

Next, using existing law you then indict and prosecute all violations of 15 USC Ch 1; the health insurance and related industries already tried to claim exemption in a case that went to the Supreme Court in 1979 and they lost.  It is therefore simply a matter of political willpower to get out the handcuffs and start issuing indictments.  That will further collapse prices since now providers will be forced to compete for business.

To put numbers on this we’re talking about “health insurance” for catastrophic events being something that costs the average person well under $100 a month and for virtually everyone they would pay only a few hundred dollars more a year in direct, uninsured cost.

With the cost of care collapsed to 1/5th of what it is now for the truly indigent we can certainly afford to help — but for nearly everyone we won’t need to, because even those of modest means can afford to pay cash at a price 1/5th of what is charged in the United States today.

The obvious question is “Why won’t Donald Trump or Congress take this position, since it’s clear on the math that it will solve the problem permanently and at the same time nearly eliminate both the Federal budget deficit and all State and Private Pension budget problems at the same time?”

The answer is quite simple: Doing so will cause an immediate and deep recession as the health industry collapses from ~19% of domestic output back to its historical level of about 3-4%.

Said recession won’t last very long because that money will get redeployed in other areas of the economy but until it does the impact on GDP will be severe, immediate and deep — and both Congress and Trump know it.

Oh, and it will put a whole bunch of lobbyists out of business too.

Published courtesy of Market Ticker

Karl Denninger founded The Market Ticker® (, a blog dedicated to uncovering market mischievousness. He is also a columnist on and has appeared on MSNBC with Dylan Ratigan, on CNBC, and is a frequent guest on WBAL talk radio in Baltimore. He produces a weekly Internet radio segment on BlogTalkRadio with real-time call-ins from listeners and occasional invited guests. Karl is also one of the original founders of the Tea Party movement, and, along with FedUpUSA, launched the first financial protests related to the bailout of banking institutions after the failure and forced takeover of Bear Stearns. Previously, he was CEO of Macro Computer Solutions, and is a self-made entrepreneur and millionaire.
  • david7134

    You are not in medicine and this can never ever understand cost and the system. First throw out Adam Smith, he does not work in this industry. The reason is that it takes a doctor till he is 30 at least to be able to work. He expects to be paid for that sacrifice and will generate the money. So you combat this by actually reducing the number of doctors. But the big problem is the government. Medicare and Medicaid do not pay there share of the cost. Stop them from fixing prices and allow the prices to be dictated by other forces. Then the big one. Change the way we do business. Allow people to buy any and all drugs across the counter. The patient is then responsible for their care, not the doctor. In short, get the government out, completely.

    • ontopofit

      A-men. I actually asked my doctor if what my paper stated was true, that he was paid so little.
      We don’t need a government take over of medicine. We didn’t want it with Hillary Care, we fought like hell to stop Obama Care, and now we have to fight to stop Rino Care.

  • ontopofit

    I was beginning to think I had lost my memory because I recalled that the whole reason for a Republican take over of DC was to REPEAL Obamacare and I couldn’t remember hearing the word REPLACE until they were all safely seated!
    RinoCare indeed!